Nortel Networks has become the latest victim of the economic slowdown. The company said it plans to slash costs resulting in 1,300 layoffs, a salary increase freeze, a continued hiring freeze and a review of its real estate holdings after the company posted $3.4 billion in losses for the third calendar quarter.
Nortel has been laying off staff on a regular basis for the last couple of years. In early 2007, Nortel slashed 3,900 jobs and moved 1,000 positions to cheaper locations like China and India. A year later, Nortel cut another 2,100 jobs.
The $3.4 billion quarterly loss, or $6.85 a share, is Nortel’s biggest quarterly loss in seven years.
Nortel President and CEO Mike Zafirovski said Nortel’s poor performance falls in line with the revised 2008 guidance the company released in September. On Sept. 17, Nortel cut revenue forecasts and said more restructuring was expected.
“In September, we signaled our view that a slowdown in the market was taking place,” he said in a statement. “In the weeks since, we have seen worsening economic conditions, together with extreme volatility in the financial, foreign exchange and credit markets globally, further impacting the industry, Nortel and its customers. We are therefore taking further decisive actions in an environment of decreased visibility and customer spending levels.”
“We are acting quickly to become a simpler and leaner company, with the greater flexibility and responsiveness required to manage our business in a rapidly changing marketplace,” Zafirovski said. “We are deeply committed to customers, and are taking the necessary steps to adjust our operating model and become a more customer centric partner that delivers the value and innovation they need to succeed.”
Since joining Nortel in late 2005, Zafirovski has cut roughly 18 percent of the company’s work force and all told Nortel has lost more than $4.5 billion since he took the helm.
In the third quarter, Nortel sales fell a total of 14 percent to $2.32 billion, down $2.71 billion from the third quarter 2007 and down from $2.63 billion from the second quarter of 2008.
Revenue from enterprise solutions dropped 8 percent to $616 million, while carrier networks dropped 24 percent to $822 million and global services revenue dropped 6 percent year over year to $507 million.
Additionally, a number of Nortel’s senior staff will leave the company in the new year, including CTO John Roese and chief marketing officer Lauren Flaherty. Global services president Dietmar Wendt and executive vice president of global sales Bill Nelson are also expected to leave Nortel on January 1.